Insurance Newshttp://www.ceres.org
Recent news about the insurance industry and the challenges and opportunities posed by climate change, water scarcity, energy transitions and other sustainability issues.
daily12011-01-11T21:15:49Z

Boston nonprofit Ceres stresses green efforthttp://www.ceres.org/press/press-clips/boston-nonprofit-ceres-stresses-green-effort
Ceres, celebrating its 25th anniversary, has become one of the world’s most influential environmental advocates by harnessing capitalism to convince companies that sustainability is central to their competitiveness and bottom lines.Its philosophy: Good environmental policy is good for business

In 2007, the technology giant EMC Corp. turned to a Boston nonprofit to help it become more environmentally sensitive — but worried that relations could become tense.

The nonprofit, Ceres, insisted that the Hopkinton company open its boardroom to financial, environmental, and social issue specialists, including critics ready to tell executives things they might not want to hear. But the relationship proved productive, and EMC, by one measure, reduced greenhouse gas emissions by 40 percent from 2005 and energy consumption per employee by more than 35 percent.

“The intent is not to get yelled at,” said Kathrin R. Winkler, EMC chief sustainability officer. “The intent is to collaborate to find ways to move the needle.”

Ceres, celebrating its 25th anniversary, has become one of the world’s most influential environmental advocates by harnessing capitalism to convince companies that sustainability is central to their competitiveness and bottom lines. Ceres pushes its way into corporate boardrooms by enlisting a network of some of the nation’s biggest institutional investors — including the $300 billion California Public Employees Retirement System — and once there demonstrates how combating climate change, cutting energy use, and preventing damage to the environment is in firms’ economic interests.

Ceres has spurred multinational corporations such as PepsiCo Inc., Nike Inc., and Ford Motor Co. to change the way they act on climate change, including Ford’s support of higher fuel-efficiency standards. In addition, the nonprofit has persuaded more than 1,000 companies, including General Motors and Apple, to sign the nonprofit’s “Climate Declaration” urging Congress to adopt new laws to combat global warming.

“What will change the debate on climate in the US Congress,” Ceres chief executive Mindy S. Lubber said, “will be when leaders of the largest economic firms and financial firms go up and say, ‘We need to act because this is hurting us financially.’ ”

From its offices on Chauncey Street, Ceres also has become a significant player in the international climate debate, demonstrating that producing less waste and using renewables helps a company’s bottom line. Lubber has spoken at the United Nations, last year addressing 500 global financial players at the Investor Summit on Climate Risk, and the World Economic Forum, a gathering of policymakers, intellectuals, political leaders, and corporate executives, in Davos, Switzerland.

Ceres was founded in 1989, just months after the Exxon Valdez oil spill that dumped more than 250,000 barrels along a pristine section of Alaska’s coastline and ultimately cost Exxon, now ExxonMobil, more than $4.3 billion in penalties, lawsuits, and cleanup costs. The disaster inspired the idea that still drives Ceres: Corporations are harmed financially when they don’t pay attention to the environment — and that matters to investors.

Ceres today works closely with 65 companies, stressing that if businesses manage their waste, energy, and supply chain well, it shows they can manage the entire enterprise, attracting investors, customers, and employees.

“They were one of the first to articulate the economic as opposed to the ethical argument in terms of investing,” said Geoffrey M. Heal, a professor at Columbia Business School who teaches the business of sustainability. Heal called Ceres a “forceful player” and said, “They’ve set out the arguments clearly.”

Ceres’s clout with corporations comes from its network of 110 institutional investors, which see the connection between sustainability and profitability, including public pension funds in New York and California. All told, these investors control $13 trillion.

“We’re thinking decades, generations out,” said Anne Stausboll, chief executive of the California Public Employees Retirement System and cochair of the Ceres board. “We have a lot of focus on long-term sustainability.”

This support makes it much easier for Ceres to open the doors to corporations, where the nonprofit aims to make decision-makers aware of their companies’ environmental and social effects. The backing gives Ceres the clout to insist on buy-in at the chief executive level, access to company data, and rigorous examination of operations by investors, environmental specialists, and social activists chosen by the nonprofit.

The companies then pay Ceres for this work.

Bloomberg L.P., the financial data and news organization, enlisted Ceres in 2008. Ceres has helped Bloomberg determine how to reduce its carbon emissions by 20 percent by 2020 from what it was in 2007, a period during which the company will double in size. Among the steps: using energy-efficient LED lighting and encouraging recycling and composting at its facilities.

Curtis Ravenel, global head of sustainability at Bloomberg, said Ceres was able to challenge the company’s practices and drive change, without being adversarial.

“What I like about Ceres is that they are aggressive, but not too aggressive,” Ravenel said. “You want them to be pushing you. That’s why I hired them, to keep us honest.”

Heal, the Columbia professor, said it’s difficult to measure the effect that Ceres has had. Investors and companies are much more aware of climate change, partly because of the media attention, partly because of Ceres, and partly because of other players, he said. “They’re pushing on a door that’s slowly opening anyway,” he said.

Lubber, however, maintains that Ceres is responsible for significant changes in attitudes about climate change in capital markets. The organization, for example, was a partner in a 2011 Citigroup report that made an economic case for increasing fuel efficiency standards in the auto industry.

Following the report, the average fuel economy standard was raised to 54.5 miles per gallon by 2025, with the support of GM and Ford, both of which work with Ceres.

Ceres officials also want corporations to include environmental data, such as greenhouse gas emissions and reductions in toxic materials into regular earnings reports so investors can weigh their progress on these issues.

Already, some 6,000 companies voluntarily disclose greenhouse gas and energy efficiency data through a program created by Ceres and later spun off as an independent organization known as the Global Reporting Initiative.

As companies and investors learn the economic benefits of sustainable practices, Ceres hopes that they’ll work to convince lawmakers that acting on climate change is not only good policy, but also good for their businesses. After all, Lubber said, money talks.

“That’s part of our theory of change,” she said, “that investors care about these issues and care mightily.”

Business for Innovative Climate and Energy Policy, or BICEP, includes more than 30 consumer companies that advocate for energy and climate legislation.

Clean Trillion Ceres has a goal of seeing annual global investments in clean energy increase from $281 billion in 2012 to $500 billion in 2020 and $1 trillion by 2030.

]]>No publisherMegan Doherty2015-02-02T14:20:19ZPress Clip9 Reasons Not to be Depressed About the Planethttp://www.ceres.org/press/blog-posts/9-reasons-not-to-be-depressed-about-the-planet
Don’t leave 2014 without realizing there have been notable — often underreported — big capital market breakthroughs on climate change, water protection and other sustainability fronts.From a sustainable future market perspective, it’s been a very good year.

Don’t leave 2014 without realizing there have been notable — often underreported — big capital market breakthroughs on climate change, water protection and other sustainability fronts. Stock exchanges requiring company disclosure on sustainability risks or bonds backed by electricity payments from solar rooftop panels may not at first glance seem compelling, but these are the mechanisms that move markets and help build a more sustainable future.

Before we head into 2015, it’s worth taking a moment to shine a light on key areas of progress.

1) Electric utility business models are changing before our eyes by eschewing new centralized power plants in favor of energy efficiency and decentralized distributed energy, which are less expensive for consumers and more resilient to extreme weather. Case in point: Consolidated Edison’s ambitious $100–$150 million investment in energy efficiency and distributed energy — rooftop solar, battery technologies and smartphone-assisted energy conservation — to avoid building a new $1.1 billion substation.

2) Energy storage is a critical cog in large-scale deployment of renewable energy. That’s why it’s a big deal that Southern California Edison announced contracts last month for more than 260 megawatts of energy storage, five times more than what the state’s utilities commission required. Among the companies selected: Ice Energy, which installs rooftop devices called Ice Bears that freeze water in 450-gallon pots. The devices run at night when temperatures are lower so making ice is easier; during peak hours, the ice is used for space cooling.

In a stunning recent analysis, Goldman Sachs found nearly $1 trillion of oil projects at risk due to shrinking demand and plummeting oil prices.

3) After many months of warnings, the financial industry is waking up to the oil industry’s potentially wasteful spending on development of new fossil fuel reserves when global oil demand is weakening and carbon-reducing trends are taking stronger hold. In a stunning recent analysis, Goldman Sachs found nearly $1 trillion of oil projects at risk due to shrinking demand and plummeting oil prices. Among the potential “zombie projects”: expensive Arctic oil, deepwater drilling and Canada’s oil sands.

4) Nearly a dozen stock exchanges, including Singapore and Taiwan, are requiring disclosure from listed companies about what they are considering and doing to manage sustainability risks such as climate change and water scarcity. This is a big deal because it’s a basic management dictum that if you’re not disclosing a particular risk, you’ll never be able to manage it. Nearly 7,000 companies already produce annual sustainability reports through GRI, but this can help capture the 70,000 plus companies that don’t yet. NASDAQ, a key partner in a Ceres-led effort to unify investors and global exchanges on this issue, is considering a similar move.

5) San Francisco’s water utility is giving new meaning to “love that dirty water” by allowing building owners and developers to produce and exchange onsite water with each other — a radical departure from traditional monopolistic water utility models. It’s paying up to $500,000 to developers who can produce water onsite — including gray water, rainwater or stormwater — for use by other entities in the city. The utility’s own headquarters is living proof of the benefits of onsite water systems: It uses 60 percent less water than comparable-size buildings with an additional construction cost of less than 1 percent.

6) U.S. farmers are among the most productive in the world, but that productivity comes at a huge cost: Their practices are not sustainable, especially in regard to pollution and water use. That’s why it’s encouraging to see Field to Market, a public/private partnership that includes Unilever, General Mills and Procter & Gamble, announce an ambitious effort to accelerate sustainable growing practices on 20 percent of the nation’s farmland — 50 million acres — by 2020. The colossal corn sector — the U.S.’s biggest commodity crop by far — will be a top priority.

Producing energy at a cost equal to conventional fossil fuel sources is the Holy Grail for wind and solar energy producers, and that day is arriving.

7) Standard & Poor’s and Moody’s are making big changes in how they scrutinize water systems that borrow money — via bonds — for major water infrastructure projects. If the changes are finalized next year, these critical credit-rating agencies will include climate risks in evaluating water utility bonds. The changes — which Ceres has been advocating since publishing a report on water bond risks several years ago — send an important signal that water systems may get higher credit ratings if they invest in systems more resilient to drought and flooding, and lower ratings if they are especially vulnerable to extreme weather. A higher credit rating can mean lower interest rates, which translates to more affordable consumer water bills.

8) Producing energy at a cost equal to conventional fossil fuel sources is the Holy Grail for wind and solar energy producers, and that day is arriving. Austin Energy signed a deal last spring for 20 years of output from a solar farm at about 5 cents per kilowatt-hour, which is 1 to 2 pennies less than utility-scale coal or natural gas power. Meanwhile, American Electric Power has signed long-term commitments for 2,500 MW of wind power, most of it in Texas and other parts of “wind alley” in the Midwest.

9) Bonds are lifeblood for any company that wants to raise capital so it can grow. Solar company execs have talked for years about selling bonds backed by solar electricity contracts, but it’s been hard to pull off. That all changed when solar installer SolarCity got the go-ahead from Standard & Poor’s to issue first-ever bonds backed by electricity payments from its solar rooftop panels. The company has since issued more than $300 million of bonds, including $201.5 million sold in July with interest rates ranging from 4 to 5.45 percent.

These capital market breakthroughs are in line with what Ceres has been working on since launching 25 years ago and will help catalyze sustainability across entire industries and the broader economy.

Looking ahead to 2015, I have some wishes: a U.S. stock exchange adopting a sustainability listing standard; the green bond marketeclipsing $100 billion a year; and the U.S. Environmental Protection Agency finalizing its carbon-reducing rule for existing U.S. power plants.

]]>No publisherMindy S. Lubber JD, MBA2014-12-30T05:00:00ZBlog ClipA Retreat From Weather Disastershttp://www.ceres.org/press/press-clips/a-retreat-from-weather-disasters
Today, from Florida to Delaware, property insurance near the water is becoming harder and harder to find.After Hurricane Sandy roared across the Northeastern United States, many homeowners on Long Island — even those who escaped the most damage — often lost their property insurance. The same thing happened in coastal Virginia after Hurricane Katrina, which hit hundreds of miles away along the Gulf Coast.

Today, from Florida to Delaware, property insurance near the water is becoming harder and harder to find.

“I’m worried because insurers only stay in markets until they deem them not profitable,” said Mike Kreidler, the Washington State insurance commissioner. “We want these insurers to stay fully in the market.”

This is not exclusively an American phenomenon. As the damages wrought by increasingly disruptive weather patterns have climbed around the world, the insurance industry seems to have quietly engaged in what looks a lot like a retreat.

A report to be released Wednesday by Ceres, the sustainability advocacy group, makes the point forcefully. “Over the past 30 years annual losses from natural catastrophes have continued to increase while the insured portion has declined,” it concluded.

Last year, less than a third of the $116 billion in worldwide losses from weather-related disasters were covered by insurance, according to data from the reinsurer Swiss Re. In 2005, the year Katrina struck, insurance picked up 45 percent of the bill.

This gradual, low-key withdrawal reveals an alarming weakness. Even as the risks of climactic upheaval increase with a warming atmosphere, the industry created to provide for civilization’s first line of defense against disasters is turning tail.

“In the long run,” the Ceres report added, “these coverage retreats transfer growing risks to public institutions and local populations, and reduce the resiliency of communities, which are less able to finance postdisaster recoveries.”

In the first report of this kind, Ceres ranked the preparedness for climate change of the 330 largest insurance firms doing business in the United States, representing about 87 percent of the property and casualty, health and life insurance market.

Using insurers’ responses last year to a climate risk survey developed by the National Association of Insurance Commissioners, Ceres ranked their performance on half a dozen indicators, from how climate change figured in risk-management systems and governance to whether they took into account climate-related risks to their investment portfolios.

The good news is that a few big firms are truly paying attention. The bad news is that there are only nine — including just two American companies, Prudential and the Hartford, and several big reinsurers like Swiss Re and Munich Re.

By contrast, 276 insurers earned “beginning” or “minimal” ratings. “Eighty-five percent of the industry is just starting to develop a plan or really not doing much at all,” said Cynthia McHale, director of the Ceres insurance program, who led the research effort.

For some insurers, apparently, the risks of climate change still seem too distant and abstract. Life insurers must hold very long-term investments in assets like real estate that could lose value sharply because of climate change. Still, Ceres noted, most of them “do not believe they face significant risks.” Similarly, with the exception of Kaiser Permanente, health insurers are ignoring the impact that climate change could have on disease patterns and human health.

Property and casualty insurers have a clearer picture of the huge potential costs they face. CoreLogic, which provides analysis on the property market, calculates that more than 6.5 million homes in the United States are at risk of storm surge damage. Their reconstruction value is $1.5 trillion, or about one-tenth of the annual output of the entire American economy.

What is holding back the insurers on the front line of climate change, it seems, is an entirely different reason: the threat of legal liability.

Lawsuits over climate are popping up. In 2011, the power company AES tried to draw on its contracts with Steadfast Insurance when an Inupiat Eskimo village in Alaska sued it, along with a bunch of coal-burning utilities, a coal producer and some energy companies, because sea ice that formerly protected the village from winter storms was melting.

The state Supreme Court of Virginia ultimately agreed that Steadfast could deny coverage. Other suits for damages have also failed. But that won’t hold liability at bay forever. Munich Re, for instance, says it believes policies covering corporate officers and directors may have to pay for damages stemming from their failure to consider the consequences of climate change in their professional activities.

“Lawsuits are an inevitable part of the American system for determining whether and how to compensate for damages,” the Ceres report noted. “The larger the alleged injuries from climate change, the greater the recovery efforts will be.”

Fears of liability risks seem to be freezing insurers like deer in the headlights. Insurance companies that were already wary of the political risk of wading into the climate change debate have been further chilled by the potential legal liability.

If they start writing policies specifically excluding liabilities related to climate change, could that be interpreted as saying that previous policies did cover them? What if they don’t mention it at all?

“Discussions of liability disclosure occur more openly outside of the U.S.,” said Lindene E. Patton, the former chief climate product officer at Zurich Re, who was a co-author of the American Bar Association’s “Climate Change and Insurance” report two years ago. “In the U. S. anything you say can be interpreted in future litigation.”

Indeed, “there’s a huge reluctance to even use the word climate change,” Ms. McHale, the Ceres expert, said. “Insurance companies did not underwrite or price for climate liability. So their lawyers advise them not to talk about it and not to use the word.”

The quandary for insurance companies, of course, is that they can’t give up writing insurance policies without eventually putting themselves out of business. And walking away from markets as they become too risky to insure is not sustainable. For one thing, as insurers on Long Island discovered after Hurricane Sandy, politicians will try to stop them.

Insurers won’t be able to stay in markets where they can’t align premiums with rising risk. Government regulators must acknowledge this fact. Policy makers must also realize that the enormous subsidies for Americans to build in harm’s way are ultimately counterproductive.

Insurers could play a constructive role in preparing the world for climate change, prodding governments and consumers to take account of rising climate risks. “If we have the ability to affect the rebuild after a catastrophe we can have an impact,” said Tony Kuczinski, chief executive of Munich Re America.

The biggest risk of all is that the insurance industry fails when it is most needed.

“At some point, sooner or later, there will be a situation where there are much higher liabilities than anybody anticipated,” Ms. McHale warned. “Some companies will have problems.”

So will the rest of us.

]]>No publisherPatricia Puszko2014-10-24T16:30:00ZPress ClipFirst-of-its-Kind Report Ranks U.S. Insurance Companies on Climate Change Responseshttp://www.ceres.org/press/press-releases/first-of-its-kind-report-ranks-u.s.-insurance-companies-on-climate-change-responses
Amid growing evidence that climate change is having wide-ranging global impacts that will worsen in the years ahead, a new report from Ceres ranks the nation's 330 largest insurance companies on what they are saying and doing to respond to escalating climate risks.Amid growing evidence that climate change is having wide-ranging global impacts that will worsen in the years ahead, a new report from Ceres ranks the nation's 330 largest insurance companies on what they are saying and doing to respond to escalating climate risks. The report found strong leadership among fewer than a dozen companies but generally poor responses among the vast majority.

The report, Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations, ranks property & casualty, health and life & annuity insurers that represent about 87 percent of the total US insurance market. The companies were ranked on a half-dozen climate related indicators, including governance, risk management, investment strategies, greenhouse gas management and public engagement (such as their climate policy positions.) The report is based on company disclosures last year in response to a climate risk survey developed by the National Association of Insurance Commissioners (NAIC).

“Despite being on the 'front line' of climate risks, most of the company responses show a profound lack of preparedness in addressing climate-related risks and opportunities,” said Mindy Lubber, president of Ceres, a nonprofit sustainability advocacy group. “A big positive in the report's findings is the strong leadership among a small number of property & casualty insurers – a trend that needs to become far more mainstream if the industry is to accelerate global responses to this colossal threat.”

The companies were ranked on a four-tier scoring system, based on a 100-point scale, that included "Leading," "Developing," "Beginning" and "Minimal" grades. Nine of the 330 companies – three percent overall – received the “Leading” rank, including ACE, Munich Re, Swiss Re, Allianz, Prudential, XL Group, The Hartford, Sompo Japan and Zurich. The Hartford and Prudential are the only U.S.-headquartered insurers among the nine firms.

The vast majority of the insurers – 276 of the 330 companies – earned “Beginning” or “Minimal” ratings. The heath and life & annuity insurers had especially weak responses, with 89 percent and 80 percent, respectively, receiving the lowest “Minimal” rating.

“As key regulators of this sector, we strongly encourage insurance industry leaders and investors who own these companies to take this challenge far more seriously,” said Washington Insurance Commissioner Mike Kreidler, who wrote the report foreword and chairs the NAIC’s Climate Change and Global Warming Working Group. “The insurance industry is uniquely positioned as the bearer of risk to make adjustments now to lessen dramatic impacts we know are coming. This is not a partisan issue, it’s a financial solvency issue and a consumer protection issue.”

Three of the nine top scoring companies were global reinsurance companies, including Munich Re, Swiss Re and XL Group.

“Rising value concentrations in cities, new growth regions, and ever-greater risk accumulations, have combined with climate uncertainty to make the management of natural hazards an increasingly critical issue,” said Tony Kuczinksi, President and CEO of Munich Re America. “For this reason, climate change presents complex risks to the property and casualty insurance industry, but it also presents a number of business opportunities. We see tremendous opportunity for our industry to take a leadership role in addressing climate change by delivering solutions that not only transfer risk but incentivize its reduction.”

“We believe that understanding the risks associated with climate change, coupled with environmentally responsible business practices, will enhance The Hartford’s competitive position, but as importantly, they are simply the right things to do,” said Alan Kreczko, The Hartford's general counsel and chair of the company's Environment Committee.

“Many of our customers recognize the economic and risk reduction benefits of green buildings and sustainable business practices,” added Noel Douglas Martin, Vice President and Assistant General Counsel, Firemen’s Fund Insurance Co., a member of the Allianz Group. “Supporting them with responsive products and services is simply a matter of good business.”

Martin noted that Fireman’s Fund is widely recognized for its innovative green building insurance and risk services in the U.S. Allianz has developed more than 150 green solutions across all business segments globally, generating more than $1.4 billion in revenues.

The report cites numerous studies and on-the-ground examples of how rising global temperatures are driving sea level increases, and more pronounced extreme weather events are causing larger damages and losses in coastal and non-coastal areas alike. The insurance sector is on the veritable ‘front line’ of these escalating financial risks, especially property & casualty firms, which often bear the financial brunt of extreme weather losses. Insured losses from Hurricane Sandy alone totaled more than $29 billion.

The changing climate also has major implications for life & annuity insurers, especially in regard to their vast investment portfolios. L&A firms have trillion of dollars of investments – roughly two-thirds of the U.S. insurance sector’s total cash and invested assets – that may be affected by wide-ranging climate-related ripples across the economy, including physical impacts, carbon-reducing regulations and fast-growing clean energy opportunities.

While the P&C sector had higher overall scores than the Health and L&A segments, only eight of the 193 P&C firms – four percent – earned a Leading rating and only 20 percent had a Developing rating.

Nearly half of P&C insurers have taken positive steps in terms of climate modeling and analysis. In many instances, insurers are using climate-informed catastrophe models to better quantify climate-related risks from more frequent and intense weather catastrophes.

Only 13 of the P&C insurers – seven percent – earned a Leading rating for climate risk governance practices, including The Hartford and Catlin, which have cross-functional committees that monitor/report to senior management and their boards of directors on climate risks and opportunities.

Despite evidence that extreme heat waves and other climate-related impacts will influence morbidity and mortality trends, L&A and health insurers show widespread indifference to climate risk, both in regard to their core business lines and their investment strategies. Only one of the 92 L&A companies – Prudential – earned a Leading rating.

None of the health insurers earned a Leading rating and only one earned a Developing rating.

Barely 10 percent of the insurers overall have issued public climate risk management statements articulating the company’s understanding of climate science and its implications for core underwriting and their vast investment portfolios.

The report includes specific recommendations for insurance companies, including:

Develop climate risk oversight at the corporate board and top senior executive levels.

Issue comprehensive, public climate policies that articulate the firm’s understanding of climate science, underwriting and investment practices, and public engagement on climate issues.

Improve climate change scenario and impact assessments by using climate-informed catastrophe models and climate scenario projection software, which can help in fine-tuning insurer product offerings and pricing.

Boost public engagement on climate risks, including advocacy for investments in resilient public infrastructure, educating policyholders on climate mitigation and promoting climate-smart insurance products.

The report also includes recommendations for insurance regulators, including:

Mandate climate risk disclosure by insurers in all 50 states. Only six states – California, Connecticut, Illinois, Minnesota, New York, and Washington – now require insurers operating in their states to fill out the NAIC’s climate risk disclosure survey.

Work with ratings agencies such as A.M. Best to develop formal evaluative measures of insurers’ climate risk management programs.

Create a database of insurance-relevant and peer-reviewed climate science research that all insurers can utilize to accelerate their responses to climate risks.

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About Ceres

Ceres is an advocate for sustainability leadership. Ceres mobilizes a powerful coalition of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy. Ceres directs the Investor Network on Climate Risk (INCR), a network of over 100 institutional investors with collective assets totaling more than $13 trillion. Ceres also directs Business for Innovative Climate and Energy Policy (BICEP), an advocacy coalition of nearly 30 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit www.ceres.org or follow on Twitter @CeresNews.

]]>No publisherMegan Doherty2014-10-22T13:47:49ZPress ReleaseAnalyzing Climate Risk: Why Mandatory Reporting Mattershttp://www.ceres.org/press/press-clips/analyzing-climate-risk-why-mandatory-reporting-matters
Fully incorporating all risks, including climate change, into the investment-decision-making process will have a tangible impact in shifting significant capital away from high-carbon emitters toward clean energy alternatives.Climate change is an important issue for the California Public Employees’ Retirement System. Rising temperatures and increasingly volatile weather events pose significant and growing risks to our $300 billion portfolio. To manage these risks, CalPERS has long included climate as a key topic for corporate engagements, whether with electric power providers, agriculture companies or oil and gas producers. We are also ramping up efforts to integrate sustainability issues, including climate risks and opportunities, in investment decision making across all our asset classes. On all these fronts, consistent and comparable corporate disclosure of material climate issues is critical.

That’s why CalPERS and dozens of other investors petitioned the U.S. Securities and Exchange Commission for climate disclosure guidance in 2007 and applauded the SEC’s decision to issue formal interpretive guidance in 2010. Since then, more companies are mentioning climate issues in financial filings, but the breadth and quality of the disclosures with the SEC are still lacking.

These shortcomings were a key point in a major report issued recently, “Risky Business: The Economic Risks of Climate Change in the United States,” by three Wall Street heavyweights: Michael Bloomberg, Henry Paulson and Robert Rubin. “Businesses and investors have largely been kept in the dark about how climate change will impact specific industries or specific regions, and that puts American businesses and the American economy in an extremely vulnerable position,” Bloomberg told reporters earlier this summer.

Just as companies need to step up their disclosure efforts, more investors should be scrutinizing material climate risk data that are being provided in corporate 10-K filings. But doing so requires an efficient way to easily find and analyze climate disclosures in 10-Ks.

A new web-based climate search tool from the nonprofit sustainability group Ceres and CookESG Research will be helpful in filling this void. Available at www.ceres.org/secsearchtool it covers annual SEC filings by all of the largest publicly traded U.S. companies in the Russell 3000. It automatically excerpts climate information from 10-K filings, such as reporting on regulatory risks, renewable energy opportunities and extreme weather impacts.

This tool is valuable for companies, analysts and investors. For companies, it provides an efficient way to understand how industry peers view material climate risks. For analysts, it can demonstrate gaps between voluntary and mandatory reporting to highlight financially material issues. And investors can be better equipped to engage directly with companies on the quality of their responses to climate change.

A new Ceres analysis derived from the tool shows that 62 percent of S&P 500 companies provided climate disclosure in their 2014 filings. But the tool finds a wide range in the quality of that disclosure, from quantified information on financial impacts to less than useful cryptic boilerplate language. Many of these companies acknowledge climate risks but provide no information on financial exposure and efforts to reduce that exposure.

In truth, securities regulators are the best positioned of any regulator to obtain comparable, quantified and detailed information from companies about climate risks. Long-standing SEC rules require disclosure of forward-looking material risks, and climate change is one of the biggest such risks that companies and investors face.

Reflecting such concerns, CalPERS’s newly adopted ten “Investment Beliefs” are meant to provide a basis for strategic management of our investment portfolio, inform organizational priorities and ensure alignment between our board and staff. Belief No. 9 states that “risk to CalPERS is multifaceted and is not fully captured through measures such as volatility or tracking error.” It expands by noting that as a long-term investor, CalPERS must consider risk factors that are slow to develop, such as climate change and natural resource availability.

Fully incorporating all risks, including climate change, into the investment-decision-making process will have a tangible impact in shifting significant capital away from high-carbon emitters toward clean energy alternatives.

To further accelerate this shift, CalPERS is an active participant in two important initiatives: carbon asset risk and green bonds. Climate disclosure is a critical element of both efforts.

The carbon asset risk initiative, which includes 75 investors managing $3.5 trillion in assets, asks some of the world’s largest oil and gas, coal and electric power companies to stress-test the financial risks that global warming poses to their businesses. The issue is especially relevant to oil and gas firms that are investing billions of dollars a year developing high-cost, high-carbon projects that could potentially be stranded as carbon-reducing regulations and renewable energy take hold globally in the coming decades. This effort resulted in new, detailed responses from companies like Exxon Mobil Corp. and Royal Dutch Shell, which illustrate, unfortunately, their unwillingness to seriously wrestle with these issues. An expectation that this risk will be discussed in more detail in SEC filings is part of the solution.

CalPERS is also eager to explore growing opportunities with fixed-income climate bonds and green bonds, a market that has exploded in the past two years. Although many factors are still in play in this emerging market, it goes without saying that better disclosure around these bonds is important for achieving even bigger growth and acceptance.

The bottom line: CalPERS is a big believer in the philosophy that what gets measured gets managed, and what gets disclosed gets done. Stronger climate disclosure is a hugely important step in managing the colossal climate challenge.

Anne Stausboll is CEO of the $300 billion California Public Employees’ Retirement System. CalPERS is a member of theInvestor Network on Climate Risk,a network of 110 institutional investors with collective assets totaling $12 trillion.

]]>No publisherPatricia Puszkoinvestor action2014-09-11T16:00:00ZPress ClipGaining Enough Groundhttp://www.ceres.org/press/blog-posts/gaining-enough-ground
Four years ago, Ceres and Sustainalytics produced a report that it called a roadmap for sustainability for the 21st century corporation, and noted that while there were pockets of leadership in sustainability, these pockets were surrounded by oceans of incrementalism that were insufficient to address the sustainability challenges confronting us.Four years ago, Ceres and Sustainalytics produced a report that it called a roadmap for sustainability for the 21st century corporation, and noted that while there were pockets of leadership in sustainability, these pockets were surrounded by oceans of incrementalism that were insufficient to address the sustainability challenges confronting us. This year, celebrating its 25th anniversary, Ceres released an assessment of the Roadmap report with the uplifting title Gaining Ground. The bumper sticker: corporations are doing better at integrating sustainability into their souls.

That is worth celebrating, to be sure. Some of the specific candles on this celebratory cake include:

More companies are incorporating sustainability performance into executive compensation packages.

Over half the 613 companies evaluated in Gaining Ground are engaging investors on sustainability issues.

Forty percent of the companies evaluated are engaging employees on sustainability issues.

Over two-thirds of the companies have taken some steps to reduce greenhouse gas (GHG) emissions.

Nearly fifty-eight percent of companies have established codes of conduct for suppliers that address human rights and other sustainability issues.

These are important milestones, ones that the companies should be proud of, and the investors and other stakeholders who encouraged them should chalk them up as accomplishments. If we are going to pass on to our children a world that provides at least as many opportunities for enrichment and fulfillment as our forebears did, these companies are the enablers.

But let us also remember that better is not the same as good enough. Reducing GHG emissions is great, but compared to the amount that we must reduce those emissions by in order to avoid crossing the 2-degree Rubicon, accomplishments to date are not adequate. Ceres and Sustainalytics also point out that there has been no significant uptick in the percentage of water-intensive companies that assess water-related risks. And while it is good that almost one-fourth of the companies tie executive compensation to measures of sustainability, it is useful to understand the history of executive compensation, and attempts to tie it to performance, which have not been terribly successful. Many companies tie performance-based shares to financial performance, but use a measure of financial performance, Total Shareholder Return, that does not appear to create much of an incentive for improved performance, according to a recent study. Performance measures that actually drive performance are not as common as they ought to be.

Progress is great, and Ceres and Sustainalytics deserve a great deal of credit for finding a medium and a message that helped to motivate the progress that has been made. Now it's time to amp it up.

]]>No publisherGemma Aquilina2014-05-12T18:40:00ZBlog ClipStatement by Ceres President Mindy Lubber on the National Climate Assessment http://www.ceres.org/press/press-releases/statement-by-ceres-president-mindy-lubber-on-the-national-climate-assessment
"We simply can no longer afford to risk our children’s futures on the false hope that the vast majority of scientists are wrong."

Today, as the White House released the Third National Climate Assessment, a comprehensive peer-reviewed analysis documenting the escalating impacts of climate change across all regions and economic sectors in the United States, Mindy Lubber, Ceres President, released the following statement:

“Today's report is a stark reminder of the urgency for expanding our efforts to curb the carbon pollution that is impacting every stretch of the United States, from extreme precipitation and flooding in the northeast, to drought, water scarcity and wildfires in the southwest. We simply can no longer afford to risk our children’s futures on the false hope that the vast majority of scientists are wrong.

The United States must dramatically scale up its investments in clean energy and energy efficiency over the coming decades to cut carbon pollution and combat the worst effects of climate change. Globally, we need to reach a Clean Trillion in annual clean energy investing over the next 36 years. The longer we wait, the more the costs—economic, human and environmental—will balloon.

Yet combatting climate change offers one of the greatest economic opportunities of the twenty-first century—spurring innovation, creating jobs, and strengthening corporate bottom lines—all while cutting consumers’ energy bills and improving public health. Close to 800 companies agree with this opportunity and are signatories to the Climate Declaration.

Ceres applauds the Obama Administration’s previous actions to cut carbon pollution, by setting standards for cleaner and more efficient cars, and supports its plan to issue the first-ever nationwide limits on carbon pollution from existing power plants within the next month. Smart, practical policies like these create incentives and provide the certainty that investors need to scale up their clean energy investments to meet the enormity of the challenge."

About CeresCeres is an advocate for sustainability leadership. Ceres mobilizes a powerful coalition of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy. Ceres directs the Investor Network on Climate Risk (INCR), a network of over 100 institutional investors with collective assets totaling more than $12 trillion. Ceres also directs Business for Innovative Climate and Energy Policy (BICEP), an advocacy coalition of nearly 30 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit www.ceres.org or follow on Twitter @CeresNews.

]]>No publisherMegan Dohertyclean trillion2014-05-06T18:31:48ZPress ReleaseSister Patricia Daly, a Visionary Leader Dedicated to Environmental Justice, Wins the Joan Bavaria Awardhttp://www.ceres.org/press/press-releases/sister-patricia-daly-a-visionary-leader-dedicated-to-environmental-justice-wins-the-joan-bavaria-award
Long-time shareholder advocate and executive director of the Tri-State Coalition for Responsible Investment, Sister Patricia Daly, OP has been awarded the sixth-annual Joan Bavaria Award for Building Sustainability into the Capital Markets.Long-time shareholder advocate andexecutive director of the Tri-State Coalition for Responsible Investment,Sister Patricia Daly, OP has been awarded the sixth-annual Joan Bavaria Award for Building Sustainability into the Capital Markets. The announcement was made today at the annual Ceres Conference, which is running April 30- May 1 at The Westin Waterfront Hotel in Boston, MA.

A pioneer of socially responsible investing, for more than 35 years Daly has helped move companies such as General Electric, ExxonMobil and Ford to improve their sustainability practices and change the way they address environmental, social and governance (ESG) risks. As the executive director of the Tri-State Coalition for Responsible Investment, she leads an alliance of Roman Catholic institutional investors, who utilize their power as shareholders to hold corporations accountable to social and environmental concerns. Daly is also the corporate responsibility representative for the Sisters of St. Dominic of Caldwell, NJ and consults for the American Baptist Churches in their Socially Responsible Investment Program.

“She’s been a visionary leader in identifying issues of social and environmental concern,” says Ford Motor Company Executive Chairman, Bill Ford, who has worked with Sister Daly on Ford's sustainability journey.

“Daly is a beacon, inspiring other shareholder advocates with her leadership and vision to continue pressing companies like Ford and GE to adopt sustainable business practices and disclose their plans to address climate risk, ”said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk (INCR).

Daly’s work with GE led them to clean up the Hudson River, removing PCPs from the New York waterway and to disclose lobbying and media costs related to PCP exposure. As founder of Campaign ExxonMobil, she mobilized shareholders to support proxy resolutions asking the company to respond to climate change.

“Through her unflagging efforts and her stewardship of the Tri-State Coalition of Responsible Investors, Sr. Pat Daly has been an influential environmental leader. One who built bridges across difference with compassion and commitment,” says Laura Berry, Executive Director, Interfaith Center on Corporate Responsibility. “I am grateful for her example and her many contributions to our field.”

Sister Daly has negotiated with companies on issues beyond sustainability including human rights, tobacco and equality. Her commitment to educating companies on their impacts and working with them to devise and implement innovative strategies has effected positive systemic change. After years of dedicated lobbying, Sister Daly and ICCR reached a victory when many of the U.S’s largest automakers agreed to press their suppliers from around the world to improve working conditions. Daly’s perseverance and faith in her cause have been an inspiration to those working in a field where change rarely happens over night.

“Sister Pat Daly has spent a lifetime in service to others and a career working to reshape how business and investors understand and respond to climate change”, said Matthew W. Patsky, CEO of Trillium Asset Management. “Like Joan Bavaria, who this award is named for, Sister Pat builds and strengthens coalitions of stakeholders; knowing that together we can accomplish exponentially more that we can on our own.”

The Bavaria Award is presented by Ceres and Trillium Asset Management each year to honor an inspiring leader working to move capital markets toward a system that balances economic prosperity with social and environmental concerns. The award honors the memory of Joan Bavaria, a pioneer of social investing who founded Ceres and Trillium Asset Management. Past recipients include Phil Angelides, President of Riverview Capital Investments, Tessa Tennant, President and co-founder of The Ice Organisation, and William Foote, founder and CEO of Root Capital.

About CeresCeres is an advocate for sustainability leadership. Ceres mobilizes a powerful coalition of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy. Ceres directs the Investor Network on Climate Risk (INCR), a network of over 100 institutional investors with collective assets totaling more than $12 trillion. Ceres also directs Business for Innovative Climate and Energy Policy (BICEP), an advocacy coalition of nearly 30 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit www.ceres.org or follow on Twitter @CeresNews.

About Trillium Asset ManagementTrillium is the oldest investment advisor exclusively focused on sustainable and responsible investing. Trillium manages over $1.5 billion in assets for clients including individuals, foundations, endowments, religious institutions, and other non-profits. To learn more about Trillium, please visit www.trilliuminvest.com.

]]>No publisherMegan Doherty2014-04-30T17:05:00ZPress ReleaseAre The 613 Largest U.S. Public Companies Actually Working On Sustainability?http://www.ceres.org/press/press-clips/are-the-613-largest-u.s.-public-companies-actually-working-on-sustainability
Corporations are getting better at incorporating sustainability into their business structure, but not fast enough and not to the scale that the planet demands.Corporations are getting better at incorporating sustainability into their business structure, but not fast enough and not to the scale that the planet demands.

Are the largest companies in the world taking sustainability concerns seriously? Or is it mostly lip service?

Often, it’s hard to tell, especially without the ability to compare the actions companies are taking within and across different sectors. That’s why the trends described in a new report that evaluates the actions of 613 of the largest publicly traded companies in the U.S., representing 75% of the the total market capitalization of all public companies in the country, are simultaneously fascinating and a bit discouraging.

The analysis, a collaboration between sustainable business nonprofit Ceres and the research firm Sustainalytics, assesses companies across four strategic areas and compares progress since the first report in 2012. Based on performance and considerations by sector, the report divides companies into four tiers (“setting the pace,” “making progress,” “getting on track,” “starting out”).

“We’re seeing companies improve across many of the expectations, but at the same time, we’re not seeing the scale of change that we really need,” says Ceres’s corporate program vice president Andrea Moffat. “We’re seeing a change, but not fast enough and not to the extent that we think is really possible for U.S. companies.”

“If we really want the change to happen, it’s got to be in the business structure,” says Moffat.

One of the most surprising and positive findings was the leap in the number of companies with top executives whose compensation packages are linked to sustainability performance--24% (146 companies out of 613), compared to only 15% in 2012. Most firms that did this, however, are in sectors with strict environmental and safety regulations. For example, at the manufacturing company Alcoa, 20% of executive cash compensation is tied to safety, environmental stewardship, and diversity goals. When it came down to it, only 19 companies (3%) had compensation linked to voluntary targets, such as greenhouse gas reductions.

Similarly, only 32% of boards of directors formally have oversight over sustainability performance, a slight uptick from 2012. The companies that take sustainability the most seriously again are utilities and materials companies that have the highest risk exposure.

A number of companies, 40%, are also engaging employees directly in sustainability, a big increase from 30% in 2012. Intel is a leader in this area, the report authors say. It trains employees to consider sustainability in business decisions and gives them incentive by, in some cases, linking sustainability performance to compensation.

Two out of three companies say they are working to reduce their carbon emissions, but only one in three have set any target deadline for their goals (35% of the 613 companies in 2014, compared to 32% in 2012). Similarly, there’s been barely any improvement in the number of companies with renewable energy programs since 2012, and only 6% of companies have “quantitative targets to increase renewable energy sourcing.”

Moffat says she was surprised there’s been so little movement, given the extreme weather, floods, and commodity price shocks many sectors have endured recently. “It’s only two years, but I would have expected a bigger change than that, especially because of what we're seeing on the ground.”

On both of the climate and energy fronts, the technology sector leads the pack and the authors cite Hewlett Packard as a particular exemplar. Unsurprisingly, the oil and gas sector is a laggard. Only four of 30 companies have concrete emissions reduction targets.

Many companies also ignore water resource risks--even companies that rely on water for their operations. Only half of the 103 companies in water-intensive industries, such as the beverage business, actually assess water-related business risks. Ceres cites Coca-Cola as one company taking these challenges seriously, as it has improved its water-use efficiency by 20% over the last decade.

Only 14% of companies have formal programs that invest in and promote sustainable products and services they produce. Nike is a leader, with its sustainable design principles integrated into the product portfolio and its recent FlyKnit running shoe that wastes less material. In 2013, Nike created a public “materials sustainability index” to help other designers in the fashion industry think in the same way.

More companies are looking at their supply chain and setting sustainability and human rights standards for suppliers. A surprising 58% of companies have codes of conduct that address human rights issues in their supply chains, compared to 43% in 2012. Only 33% of companies have established some form of program to engage suppliers on sustainability performance.

“While our analysis shows that companies and investors are increasingly aware of these challenges, many are just starting to get informed about how to address them,” says the report.

Moffat says she hopes that investors and companies look at this report both as a benchmark to make comparisons and as an inspiration for ideas. There's a lot more detail in the full report, as well as scorecards for each individual company, so take a deeper dive.

]]>No publisherMegan Doherty2014-04-30T16:15:00ZPress ClipCeres report: US corporate progress on sustainability remains incrementalhttp://www.ceres.org/press/press-clips/ceres-report-us-corporate-progress-on-sustainability-remains-incremental
The latest evidence that businesses are failing to grasp the need to restructure their business models comes from an analysis of 613 major publicly listed US companies, which represent three-quarters of the country's total stock market capitalisation.Most of America's largest companies aren't taking the action needed to tackle climate change, according to a new report

If a car is hurtling at full speed towards the edge of a precipice, would it suffice to ease up a little on the gas?

This is the perfect metaphor for how America's largest companies are responding to the rapidly worsening social and environmental challenges the world is facing.

The latest evidence that businesses are failing to grasp the need to restructure their business models comes from an analysis of 613 major publicly listed US companies, which represent three-quarters of the country's total stock market capitalisation.

The report by Ceres, a non-profit focused on sustainable business, and Sustainalytics, a research firm focused on environmental, social and governance analysis, shows that while a small number of companies are showing leadership in some areas of sustainability, the vast majority are making progress that can at best be described as modest.

While there has been some incremental improvement across a number of measures since the research was last carried out in 2012, it is worrying that so few companies have incorporated any time-bound quantitative targets for improving their performance.

The study highlights some of the setbacks, such as a decline in the percentage of water-intensive companies assessing water-related business risks, as well as a drop in the number of businesses (19%) that have strong sustainability policies and risk management systems in place.

Despite the Intergovernmental Panel on Climate Change warning of the need for urgent action to limit the devastating impacts of climate change, two-thirds of the companies have failed to establish time-bound reduction targets for greenhouse gas emissions and 94% have not set quantitative targets to increase renewable energy sourcing.

"US companies are simply not taking the comprehensive actions necessary – through energy efficiency, renewable energy procurement and other steps – to tackle climate change," says the report. "Efforts to assess whether companies are reducing their GHG emissions are hampered by weak disclosure."

'Simply not enough'

Another concern for the future is that of the 419 companies evaluated for innovation, 86% have adopted no formal programs to invest in and promote sustainability products and services.

The report's conclusion is stark: "We are still not seeing the speed of change that is required – or the scale of innovation that is possible. Incremental progress in tackling global climate change and other sustainability threats is simply not enough.

"Given the acceleration of environmental and social challenges globally – floods, droughts and workplace tragedies, among them – corporate actions and solutions are not keeping pace with the required level of change.

"It is imperative that many more companies shift from being reactive to proactive in embracing the sustainability challenges that lie ahead. The need for investors, businesses, NGOs and other stakeholders to fully engage in the essential work of creating a sustainable economy has never been more urgent."

More than 80% of the 613 companies were found to be failing to approach sustainability in a comprehensive fashion, and few are creating the incentives to spur improved performance.

There are few surprises in the list of companies considered to be showing leadership in individual areas, such as supply chain management and biodiversity. The list, which has not changed much in the last few years, includes the likes of Nike, Ford, Intel, Alcoa, Coca-Cola, PepsiCo and Starbucks.

The report warns that "treating sustainability as a stand-alone effort, or one that can be managed apart from the rest of the enterprise, is short-sighted and risky because sustainability is implicated in every decision, from product design and delivery to supply chain management."

The comprehensive study looks at 20 measures that would suggest whether companies are integrating sustainability into their business systems and decision-making, based around the four key areas of governance, stakeholder engagement, disclosure and performance.

Leadership

Only a third of the 613 companies' boards of directors formally oversee sustainability performance, while a quarter link executive compensation to sustainability performance. Even worse, only 3% link executive compensation to voluntary sustainability performance targets – such as greenhouse emission reductions – that go beyond goals required for compliance with laws and regulations.

The report says "the significant number of companies with no visible management level oversight of sustainability is disappointing and must be improved".

Stakeholder engagement

Just over half the companies are engaging investors on sustainability issues, up from 40% in 2012, but only a tiny 3% are showing leadership by using multiple tactics such as integrating sustainability information into mainstream investor communications, highlighting sustainability performance and innovations at annual meetings, and directly engaging with shareholders on sustainability topics.

A third of companies disclose how they formally engage stakeholders on sustainability issues, but only 7% engage stakeholders in the materiality assessment process and disclose the insights gained.

Meanwhile, 40% have some programs in place to engage employees on sustainability issues, yet only 6% go further by systematically embedding it.

Procurement

While a third of companies have established some form of engagement with suppliers on sustainability performance, just 14% have formal supply chain engagement programs in place.

Water risks

Of the 103 water-intensive companies evaluated, only half assess water-related business risks, a decline from the 55% in 2012. Only a quarter are prioritising efforts in water stressed regions.

Human Rights

Fifty-eight percent have supplier codes of conduct that address human rights in supply chains, compared to 43% in 2012, but 79% have no formal human right policies covering their direct employees and only 19% have policies that cover an employee's right to freedom of association and to collective bargaining.

Biodiversity

While most companies have policies and management systems that broadly address environmental issues, an evaluation of 126 companies across seven relevant sectors found only eight companies with a formal biodiversity policy.

Attention to biodiversity as a material business issue is especially lacking in the food and beverage, with only Molson Coors disclosing a formal policy, and the energy services sector which did not have a single company with a formal policy.

Disclosure

Just over half of US companies in the Ceres report evaluation publicly disclosing sustainability information, which compares poorly with the 93% of companies in the Global Fortune 500 that report that data. Less than one in 10 of the corporations seek out verification of their reporting.

Of particular concern is that more than half of the 30 companies in the oil and gas sector fail to publish a sustainability report. The study says: "Due to the sector's high sustainability impacts and potential exposure to license to operate issues, this is a significant area where improvement is needed."

]]>No publisherMegan Doherty2014-04-30T16:15:00ZPress ClipEven oil companies don't want a 'roasted world'http://www.ceres.org/press/press-clips/even-oil-companies-dont-want-a-roasted-world
When climate scientist Rosina Bierbaum speaks, her central theme is the "roasted world" -- a bleak picture of what the planet will probably look like if carbon pollution continues unchecked.Editor's note: Mindy Lubber is president of Ceres, a nonprofit organization that mobilizes business leaders to embrace a sustainable future. It was founded in response to the Exxon Valdez spill. This is one in a series of columns CNN Opinion is publishing in association with the Skoll World Forum on people who are finding new ways to help solve the world's biggest problems. Lubber will participate in the 2014 Skoll World Forum in Oxford, U.K., from April 9-11.

When climate scientist Rosina Bierbaum speaks, her central theme is the "roasted world" -- a bleak picture of what the planet will probably look like if carbon pollution continues unchecked, leading to 4 degrees Celsius of warming by mid-century.

Four degrees may not sound like a lot -- but it would change our lives drastically.

Mega-heat waves in 2010 in Europe and Russia were estimated to have caused up to 50,000 heat-related deaths, according to some reports. This "will become the normal," said Bierbaum, a review editor of the United Nations' Intergovernmental Panel on Climate Change report, speaking at the U.N. in January. Food production in key regions such as sub-Saharan Africa and South Asia could drop by as much as 50%, she added. Accelerated melting of the Greenland and Antarctica ice sheets will cause sea levels to rise by 1 to 2 feet, putting Miami and Mumbai, India, as well as many other low-lying cities, at enormous risk.

It's a bone-chilling scenario.

We don't always have control of our destiny, but in the case of climate change we know exactly what it will take to protect our planet and economy from disaster. Companies, investors and policymakers must scale up clean energy investments and scale down fossil fuel investments.

Recently, we saw compelling evidence that big business is getting more serious about climate change. And it came from none other than the world's largest fossil fuel company, Exxon Mobil.

Nearly 25 years to the day after the Exxon Valdez supertanker ran aground in Alaska, spewing 260,000 barrels of crude oil, Exxon has agreed to report to investors on how climate change will affect its core business model, including the prospect that major portions of its oil reserves may need to be left in the ground as carbon-reducing policies and expanded use of renewable energy take hold globally.

After 25 years, Exxon Valdez oil spill hasn't ended

I remain guarded about how major oil companies will ultimately transition to being energy companies rather than fossil fuel companies, boosting our economy sustainably rather than pushing it closer to a breaking point. But Exxon's commitment reflects a growing consensus among business leaders and investors that climate change is a core economic risk that must be tackled now. This is in stark contrast to just a few years ago, when climate change was seen as a tree-hugger issue relevant more to polar bears than financial bottom lines.

After years of foot-dragging, businesses are recognizing the scientific certainty and economic effects of climate change -- from higher food costs to broken supply chains to costlier weather-related disasters. They see the powerful dollars-and-cents argument for mitigating carbon pollution today rather than waiting until it is too late and too expensive.

Companies such as General Motors, Apple and Starbucks are now calling for strong climate and clean-energy policies in Congress. They are among more than 750 companies that have signed Ceres' Climate Declaration, which brings together companies and individuals to demonstrate support for national action on climate change.

The world's largest institutional investors -- including many of the 500 that attended the U.N. Investor Summit on Climate Risk -- are actively integrating climate risks and opportunities into their investment decisions. Some are already pulling out of riskier carbon-intensive investments such as coal companies and are setting specific targets for elevating clean energy investments.

Major stock exchanges are also beginning to require listed companies to disclose climate and other sustainability risks to investors. And securities regulators, including the U.S. Securities and Exchange Commission and state insurance regulators, have taken strong steps, at Ceres and investors' urging, to require similar climate risk disclosure.

These actions are profoundly important if we are to have any hope of thwarting, or limiting, the impact of this colossal global threat, which requires a massive shift in our economy to clean energy and away from fossil fuels.

Solving climate change and building a sustainable global economy cannot happen unless companies and investors realize their role in the problem and become part of the solution.

We are making progress. Yet even as the biggest companies in the world change their business practices and come out in support of strong climate action, it remains a deeply controversial issue in Washington, which has led to policy paralysis. It is unfathomable. We must demand a vigorous debate over how best to meet the climate challenge, casting climate deniers out to the fringe where they now belong.

Unless we act now, the threat that climate change poses to the planet will be exponentially greater. And the solutions will be increasingly harder to implement down the road. The "roasted world" warning is a real threat, but it doesn't need to become our reality.

]]>No publisherMindy S. Lubber JD, MBA2014-03-25T19:24:38ZPress ClipExxon Valdez Oil Spill Still Leaves a Painful Legacyhttp://www.ceres.org/press/blog-posts/exxon-valdez-oil-spill-still-leaves-a-painful-legacy
Exactly 25 years ago, 260,000 barrels of crude oil from the Exxon Valdez oil tanker inundated the frigid, fragile waters of Alaska's Prince William Sound.Exactly 25 years ago, 260,000 barrels of crude oil from the Exxon Valdez oil tanker inundated the frigid, fragile waters of Alaska's Prince William Sound. Many disturbing physical reminders of the largest tanker disaster in U.S. history still linger -- populations of marine mammals, birds, fish and invertebrates still haven't fully recovered, and thousands of gallons of tarry oil remain embedded in the otherwise pristine beach sediment.

At the time, politicians pledged they would heed powerful lessons from the spill to drive and dictate a cleaner future. Yet many of the most fundamental lessons are still being ignored as we enter a perilous future marked by escalating fossil fuel pollution and warming global temperatures.

The spill did, of course, spur some immediate action, such as double hull design requirements for oil tankers and tougher operating procedures for transporting oil in Alaskan waters -- steps that have contributed to a significant drop in shipping spills in recent decades.

It also inspired a much-needed re-evaluation of the role and responsibility of companies as stewards of the global environment -- an ethic that was the driving force in the launch of my nonprofit sustainability group, Ceres, in fall 1989.

Ceres began with the creation of the Valdez Principles, later named the Ceres Principles, a 10-point code of environmental conduct that Ceres' founding investor members encouraged companies to publicly endorse. This kernel of an idea has since blossomed into a sweeping corporate sustainability movement that has thousands of companies reporting annually on their environmental strategies, setting goals to reduce pollution and sourcing more renewable energy.

Progress, to be sure, but it's hardly enough. Today's global environmental problems are bigger and more profound than ever, the most obvious example being climate change. Even as the scientific community and a growing number of corporate CEOs agree that climate change is underway due to human activity, global carbon pollution is increasing -- last year's record levels were 2.1 percent higher than 2012 -- and climate change is advancing faster than anyone would have predicted a decade ago.

Why are we still so far from a sustainable economy, even after the powerful lessons of the Exxon Valdez, the BP oil disaster in 2010 and Superstorm Sandy in 2012? Here are a few key impediments:

First, policymakers and the public are adept at responding to explicit environmental disasters, especially when there is an easily identified villain. But finding the resolve to tackle slowly evolving calamities, such as climate change, where pollution sources come from car exhaust pipes to smokestacks, has been far more challenging. Even after Hurricane Sandy, the colossal storm that shut down New York City and Wall Street, Congress has been unable to muster a response beyond approving more disaster relief spending.

Second, companies and capital markets continue to be hampered by short-term thinking, which drives far too many CEOs and investors to focus on quarterly earnings performance. This comes at the expense of the long-term value creation and profitability that would result from sustainability-oriented business strategies. A sobering statistic in this regard: 63 percent of the 1,000-plus corporate board members and executives surveyed by McKinsey last year said pressures to generate strong short-term results had increased over the past five years.

Third, we have been unable to curb our myopic reliance on fossil fuels. Despite convincing evidence that fossil fuel pollution is putting us on a path toward catastrophic climate change, the oil and gas industry is spending massive amounts of capital -- more than a half trillion dollars a year -- to find and extract fossil fuels from more challenging and unconventional places, including oil sands in Canada (where the oil is bound up in sand) and remote deep-water locations such as the Arctic. The speed and scale of the hydraulic fracturing shale energy boom in the U.S. -- a form of extraction with major water and air pollution impacts that is exempt from several key federal environmental laws -- is no less alarming.

We can put our economy on a more sustainable path by revisiting the lessons taught by the Exxon Valdez disaster: Corporations must plan for a cleaner future and be held accountable; policymakers, especially Congress, must support strong climate and energy policies that protect our health, economy and environment; and, we must reduce our collective reliance on fossil fuels. Here's how:

• Spend less money developing new fossil fuel reserves that pose risks to both the global environment and investors themselves. Due to a variety of trends, including escalating carbon-reducing regulations, renewable energy sourcing and other low-carbon technologies, many coal and oil reserves being developed today may ultimately be worthless as global demand for fossil fuels declines. Fossil fuel reserves that have both expensive production costs and a high carbon footprint are especially vulnerable to these trends. Ceres is coordinating an effort by nearly 100 institutional investors who are pressing the world's 45 largest fossil fuel companies on these concerns.

Boost global spending on clean energy. The International Energy Agency states that to keep global warming below the critical two degree Celsius threshold, global clean energy investment by governments, companies and investors must be increased by an average of $1 trillion a year for the next 36 years. Ceres calls this the Clean Trillion energy challenge, which calls for doubling clean energy investing to $500 billion a year by 2020 and to $1 trillion a year by 2030. Our report, "Investing in the Clean Trillion: Closing the Clean Energy Investment Gap" contains 10 specific action steps for achieving this goal.

Companies and investors must be bolder in advocating for stronger action on climate change and other sustainability threats. These market actors can help end the partisan gridlock over climate change by advocating forcefully for state and federal policies that will help secure a stronger, sustainable economy. It's encouraging that 750 leading companies, including General Motors, Apple, Unilever and KB Home, have already signed the Ceres' Climate Declaration calling for concerted Congressional action to combat climate change. But more companies -- especially their CEOs -- need to join in.

]]>No publisherMindy S. Lubber JD, MBAclean trillion2014-03-24T15:33:05ZBlog ClipInsurers Have Huge Role As Clean Energy Investorshttp://www.ceres.org/press/blog-posts/insurers-have-huge-role-as-clean-energy-investors
Conversations about climate change and the insurance industry usually focus on catastrophic storms and their damaging financial ripples for insurance providers. Given skyrocketing extreme-weather losses in recent years, it’s surely a legitimate issue that should be making insurers re-think their business models.

Conversations about climate change and the insurance industry usually focus on catastrophic storms and their damaging financial ripples for insurance providers. Given skyrocketing extreme-weather losses in recent years, it’s surely a legitimate issue that should be making insurers re-think their business models.

But insurers have another important role on the climate issue, which is how to invest their vast sums of money and whether substantially more could be supporting low-carbon technologies that will reduce the pollution that’s warming the planet.

The simple truth is that reversing climate change will require trillions of dollars of additional investment in solar, wind and other clean energy projects.

In fact, total global investments in clean energy must be doubled to $500 billion a year by 2020 and quadrupled to at least a trillion annually by 2030. At Ceres, we’re calling this the Clean Trillion, and only by reaching these goals do we have a solid chance of limiting global warming increases to 2 degrees Celsius. At current investment levels, global temperatures are on a path to increase by 4 to 5 degrees, a potentially catastrophic scenario for the global environment and economy.

Although insurance companies have the largest investment portfolios in the world – with assets totaling about $25 trillion – their money has largely been sitting on the sidelines when it comes to clean energy. The Organization for Economic Cooperation and Development estimates that insurance companies and pension funds invested only $22 billion in clean energy infrastructure from 2004 to 2011, which is less than 2.5 percent of the total amount invested in clean energy financing during those years. That is a miniscule amount – and unless it grows exponentially we have nary a chance of slowing climate change.

But the industry’s tepid interest in clean energy is changing.

The combination of lower renewable costs and long-term buyer agreements to use the power is opening the door for many more insurers to invest in clean energy projects, either directly or indirectly.

For example, MetLife has a major ownership stake in a 30-megawatt solar PV power plant in Texas, which has a 25-year contract to sell its power to a local utility. Allianz has 43 wind farms and seven solar parks in its portfolio, which are generating more than 1,000 megawatts of power across Europe.

Other insurers like Allstate and AIG are buying up bond issuances, whose payments are linked to cash flows from clean energy projects (mostly wind and solar). Even investment maven Warren Buffett is getting in the game: last year, a subsidiary of his insurance firm Berkshire Hathaway issued $1 billion of green bonds to build and operate solar farms in California.

While these dollar amounts are still relatively small, there are strong indications that exponential growth is just around the corner.

More than $2.6 billion in green bonds have already been issued in 2014, adding to the record $10 billion issued in 2013. In fact, this caused the Climate Bond Initiative to double its projections for green bond issuances in 2014, which it made only a month ago, to $40 billion. Bloomberg New Energy Finance envisions a potential $142 billion clean energy bond market from 225 utility-scale wind and solar projects in the U.S. and Europe alone.

Meanwhile, more insurers are making public commitments to invest in green bonds – among the most recent, the Zurich Insurance Group, which has set an initial target to buy $1 billion of green bonds.

Insurance executives cite similar reasons for their growing interest in clean energy investments: the ability to earn stable, risk-adjusted returns; reduced vulnerability to climate risks and financial market fluctuations; and a growing array of projects that are environmentally and financially attractive.

Among Zurich’s green bond investments, for example, is a World Bank project that is replacing inefficient light bulbs, refrigerators and air conditioners in low and moderate-income households in Mexico with efficient models, thus avoiding an estimated 1.8 million tons of carbon pollution.

“If instruments and opportunities exist that provide market returns as well as tangible measurable environmental impacts, then I think that is a great investment opportunity,” said Cecilia Reyes, group chief investment officer at Zurich, speaking at the UN Investor Summit on Climate Risk in January in New York. “The question to ask is not why invest in green bonds, but why not invest in green bonds.”

Among the biggest hurdles is a lack of clean energy projects and fixed-income investment products available to insurers and pension funds. This is a big reason why green bond issuances in recent months have been selling out in a matter of hours.

Better standardization of what constitutes a climate bond or a green bond is an important step for sellers and buyers that will grow the market. By reassuring potential buyers about what they are purchasing, better standardization will minimize the due diligence burden on investors and reduce transaction costs for the sellers.

Another key step is stronger government climate policies – market signals – that result in a strong price on carbon pollution, thus making low-carbon technologies more financially attractive.

Ultimately, it’s about all public and private financial institutions – not just supranational organizations like the World Bank – entering the game with a broad universe of clean energy investment products that will appeal to more insurers and pension funds. Until policy and market conditions allow that to happen, insurers may have limited options for scaling clean energy investments to levels approaching the Clean Trillion.

]]>No publisherMindy S. Lubber JD, MBA2014-03-03T19:41:47ZBlog ClipFacing More Extreme Weather, Insurers and Cities Forge New Path Toward Climate Resiliencyhttp://www.ceres.org/press/press-releases/facing-more-extreme-weather-insurers-and-cities-forge-new-path-toward-climate-resiliency
City leaders and urban planners now have a suite of new tools to better protect residents from extreme weather events like Typhoon Haiyan and Superstorm Sandy, thanks to three new resources released this month by Ceres, ClimateWise and other groups.City leaders and urban planners now have a suite of new tools to better protect residents from extreme weather events like Typhoon Haiyan and Superstorm Sandy, thanks to three new resources released this month by Ceres, ClimateWise and other groups.

Developed in partnership with insurance-industry leaders and cities on the frontline of rising sea levels and more powerful extreme weather, the tools are designed to catalyze and expand cross-sector collaboration; present a new strategic planning framework for strengthening resiliency; and assist city leaders and other key stakeholders in organizing follow-up actions.

“By incorporating the insurance sector’s risk-management expertise into their planning, coastal and non-coastal cities can strengthen their resiliency and better protect their economies from natural disasters and climate change,” said Mindy Lubber, president of Ceres, a nonprofit organization mobilizing business leadership on climate change and other sustainability challenges.

“To ensure ongoing investment and sustainable growth in our cities, we need to build confidence in their future by strengthening their ability to adapt to climate change and to bounce back after disasters,” added John Coomber, chairman of ClimateWise, noting that the cost of urban disasters in 2011 alone was over $380 billion.

The tools reflect input and best practices from more than 150 insurance industry executives, developers, city leaders and other stakeholders in Boston, San Diego, and Toronto, who came together for a series of climate resiliency workshops over the past year. The workshops were organized by Ceres in collaboration with ClimateWise, a global insurance industry leadership group, and ICLEI, a global network of more than 1,000 local governments leading on sustainability.

Leading insurers in the U.S. and Canada were key partners in the workshops.

“Getting climate resilience right in cities should be a priority for all of us," said Mark Way, Head of the Sustainability Americas Hub at Swiss Re, the global reinsurance giant. “This initiative demonstrates the importance of bringing the insurance industry into the climate resiliency discussion.”

“The challenge of harnessing the expertise and resources of various stakeholders, and catalyzing a collective response to better protect our societal and economic interests is no small undertaking,” added Kathy Bardswick, president and CEO of The Co-operators in Canada, another workshop participant. “Through innovation and collaboration, we can succeed in building more resilient cities that serve as an engine for sustainable development for this and future generations.”

“We recognize that insurers have a pivotal role to play in translating scientific findings and models into risks that can be more readily understood by businesses and communities,” added Mazdak Moini, VP Underwriting Strategy, Risk & Reinsurance, at Aviva Canada. “We also realize that such work can’t be done in isolation. That’s why we value the collaborative platform that ClimateWise/Ceres provides insurance leaders, including coordinating a single, coherent voice that policymakers and planners can rely on to make decisions for the long term resilience of cities.”

The Insurer-City Resiliency Toolkit, based on materials used during the workshops to identify priorities for collaborative action, will assist city leaders and other urban resiliency stakeholders in organizing their own multi-stakeholder workshops.

Historically, efforts to build climate resilience in cities have been led by public policy and planning efforts. But faster and larger-scale investment and behavior change is needed to ensure cities are prepared for future risks. The private sector has a crucial and catalytic role to play.

“Cities cannot do it alone,” said Ewa Jackson, acting director of ICLEI Canada. “Cities cannot work effectively in isolation. But through public-private partnerships, cities and the insurance sector have the power to protect people and property, and to develop urban resiliency.”

“Analyzing and managing risk is at the heart of the insurance business,” Ceres’ Mindy Lubber said. “And just as insurers led the charge for fire safety in the 20th century, insurers are well placed to help identify strategies for managing the risks of a changing climate.”

About Ceres

Ceres is a nonprofit organization mobilizing business and investor leadership on climate change, water scarcity and other sustainability challenges. Ceres directs the Investor Network on Climate Risk (INCR), a network of over 100 institutional investors with collective assets totaling more than $12 trillion. Ceres also directs Business for Innovative Climate & Energy Policy (BICEP), an advocacy coalition of nearly 30 businesses committed to working with policy makers to pass meaningful energy and climate legislation. For more information, visit http://www.ceres.org or follow on Twitter @CeresNews.

]]>No publisherMegan Doherty2013-12-04T16:27:28ZPress ReleaseChubb and Travelers still grappling with climate change post Sandyhttp://www.ceres.org/press/blog-posts/hubb-and-travelers-still-grappling-with-climate-change-post-sandy
Hurricane Sandy was a wake-up call for cities everywhere about the risks of unprecedented storms.Hurricane Sandy was a wake-up call for cities everywhere about the risks of unprecedented storms.

With more than 1 million insurance claims filed in New York and New Jersey, rebuilding is far from complete. This shines a spotlight on the huge role property and casualty insurance companies can play to reduce these extreme weather risks and the costs of rebuilding.

To get a sense of how insurers are responding to climate concerns, I looked at Securities and Exchange Commission filings and sustainability reporting by Chubb and Travelers, two of the largest U.S. property and casualty insurers, to see if they thought climate change posed materials risks.

While these insurers are working to address sustainability issues, they need to boost their efforts to address climate risks and take a cue from insurers such as ACE, which is leading the charge.

The nature of insurers

The very nature of insurers -- to assess risk -- will grow increasingly difficult due to climate change's effects on weather. Insurers faced global losses from catastrophes of around $50 billion annually in recent years, noted Lara Mowery of reinsurer Guy Carpenter. As a result, insurers need to adjust their business plans, she said: "Over time, this has involved and will continue to involve capital at risk. We can't just keep putting more money in the path of what's happening."

Companies such as Chubb and Travelers should be commended for starting sustainability programs. Both have responded to the Carbon Disclosure Project (CDP) questionnaire for at least six years, although neither produces a sustainability report. Travelers has been named to the Dow Jones Sustainability Index for seven straight years, and is one of six insurers out of 140 companies in the index.

I spoke to representatives at each company. Chubb had no comment on this column. Patrick Linehan, vice president of corporate communications at Travelers, discussed the company's recognition by the Dow Jones Sustainability Index and its climate reporting in SEC filings, to CDP, and in the National Association of Insurance Commissioners' insurer climate risk disclosure survey.

In their SEC 10-K filings, neither company explains the specific climate risks they face. They do not quantify risks nor discuss the timeframe when they could occur.

Chubb said that some risks exist but could not predict their impact. "We cannot predict the impact that changing climate conditions, if any, will have on our results of operations or our financial condition."

Travelers discussed the increasing risks it faces from hurricanes and other weather events. It mentioned potential risks, such as increased frequency of claims due to severe weather conditions, as well as its catastrophe models. "Changes in climate conditions could cause our underlying modeling data to be less predictive, thus limiting our ability to effectively evaluate and manage catastrophe risk," the company said.

In their CDP responses, the companies discussed the physical risks of climate change, such as changes in precipitation extremes, droughts, snow, ice and other effects.

But both Chubb and Travelers called the timeframe of these risks, their likelihood and their magnitude of impact "unknown."

ACE leads the way

It's easy to find insurers who tell investors more about these risks.

The ACE group, a property and casualty insurer, report on three imminent risks: changes in precipitation extremes and droughts, changes in precipitation patterns, and hurricanes and typhoons. ACE said that each is "more likely than not" to have a "medium-high" impact on the company within one to five years.

ACE even characterized how precipitation extremes and droughts could particularly affect it.

"The areas exposed are property and crop coverage, which collectively comprise approximately 40 percent of our gross written premium annually," ACE said. "The risk is that actual losses in a given year may exceed the underlying underwriting and actuarial assumptions used to price products, thereby eroding profitability and, in extreme instances, shareholder capital."

Chubb and Travelers could do more to help reduce the future impacts from storms such as Sandy. A 2013 Ceres report includes recommendations for insurers to better manage climate change. They should, for example, treat climate change as a companywide strategic issue that affects all functions at all levels. Firms should formalize this in a public corporate policy statement.

Companies also should evaluate the potential for changes in future risk exposure due to climate change, such as supporting climate-related research and developing catastrophe models that anticipate the probable effects of climate change on extreme weather events.

"ACE's risk management modeling and underwriting practices continue to adapt to the developing risk exposures attributed to climate change," the company said. "For example, since the earth's climate appears to be changing in ways inconsistent with the historical record upon which catastrophe models draw data, ACE has adopted a shorter-term view of event frequency that is higher than long-term historical frequency."

ACE's risk assessment process also factors in the potential impacts on its facilities and operations.

"Although minimal, the direct risk to ACE's business operations exists if such weather events occur in regions and cities in which ACE has offices," ACE said. "The company has developed a business continuity program to respond to any incident that may disrupt business operations."

By contrast, Chubb and Travelers do not explain how climate change is incorporated into their modeling and risk management work.

Hurricane experts worry that Sandy was a sign of bigger storms to come, with one even warning that "Sandy was not the big one."

It's time for U.S. insurers such as Chubb and Travelers to redouble their efforts to address climate risks.